Insider Betting Could Lead To Federal Sports Wagering Regulation

Like insider trading on Wall Street, “insider betting” is the big gaming concern in Congress right now. The perceived threat of cheating oddsmakers with privileged information might be enough to get federal sports wagering regulation off the ground.

After the PASPA disaster, the last thing most states want is a different slate of federal regulations on their new (or forthcoming) sports betting industries. However, many lawmakers are concerned about the potential for inside information to tip the scales against sportsbooks and other gamblers. This could lead to federal legislation that criminalizes the practice.

Given that most states with legal sports betting already have language that makes insider betting unlawful, it remains to be seen how pressing an issue this really is at the federal level. It is also worth considering what role the leagues themselves have to play in encouraging or cracking down on insider betting.

Insider Betting Could Lead To Federal Sports Wagering Regulation

What Is Insider Betting?

Put simply, insider betting is the new mainstream buzzword for what states like West Virginia and New Jersey call the acquisition and utilization of “knowledge...not available to the general public” that could have a germane effect on the outcome of a wager. This insider information could come from any source.

It could come from an official who intends to steer games in a given direction, like the scandal involving former NBA official Tim Donaghy. It could come from players themselves, as in the MLB’s infamous Black Sox debacle (of which this year is the 100th anniversary). It could even come from staffers and locker room attendants who just happen to be privy to some unpublished injury or discipline report.

League Injury Reports More Serious Than Ever

The avenues for such potential abuses are almost infinite, but this last one above is perhaps the most pressing going forward. Athletes in major sports are handsomely paid to the point where a thrown game wouldn’t usually be financially compelling. Even officials are paid well enough that this shouldn’t be an issue.

But major sports teams have hundreds of lesser staffers and day laborers who could stumble across privileged information. That’s why the NFL, for example, disallows anyone employed by the league itself or any constituent team from wagering on league games. This will be a common practice going forward.

Of course, the leagues have an inbuilt problem here. In the constant effort to keep their competitive edges against their opponents, it often behooves a team to file misleading or false injury and discipline reports. Team insiders, then, could use that private information for placing bets or aiding others in doing so.

A good example of this arose in the 2018 NBA Finals. LeBron James, in a fit of rage, punched a whiteboard after the Cleveland Cavaliers’ Game 1 loss to the Golden State Warriors. He broke his hand, and his play was affected for the remaining series sweep. This information was kept hidden from the public until after the playoffs, despite the NBA’s rules mandating the disclosure of player injuries. Professional oddsmaker Tom Stryker recalls this case with distaste.

“I would’ve never come up with that pick or advised my clients to play Cleveland knowing [James] was hurt. … And of course, when it comes out he was injured, there’s a level of frustration on my end.”

It will be interesting to see if any state implements laws requiring the various sporting leagues to disclose all pertinent information as it relates to sports betting going forward. In other words, leagues themselves could withhold germane betting information, and that could be problematic for a host of reasons.

States With Existing Insider Betting Laws

There are several states that already have existing insider betting laws on the books. These include Nevada, New Jersey, West Virginia, Mississippi. Additionally, a number of states have such laws already in place pending the overall legalization of sports betting within their borders. These include New York, Massachusetts, Tennessee, Indiana, and several others.

LegalSportsBettingSites.com reports some states have overlooked adding such laws to their books. Delaware, Rhode Island, Pennsylvania, and New Mexico have no explicit language banning the use of insider or non-public information for betting purposes, though these will likely be added to the state books in the near future.

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